a) Given two LIBOR spot rates (L(t, t, T)) and (L(t, t, S)), compute the corresponding LIBOR
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a) Given two LIBOR spot rates \(L(t, t, T)\) and \(L(t, t, S)\), compute the corresponding LIBOR forward rate \(L(t, T, S)\).
b) Assuming that \(L(t, t, T)=2 \%, L(t, t, S)=2.5 \%\) and \(t=0, T=1, S=2 T=2\), would you buy a LIBOR forward contract over \([T, 2 T]\) with rate \(L(0, T, 2 T)\) if \(L(T, T, 2 T)\) remained at the level \(L(T, T, 2 T)=L(0,0, T)=2 \%\) ?
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Related Book For 
Introduction To Stochastic Finance With Market Examples
ISBN: 9781032288277
2nd Edition
Authors: Nicolas Privault
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